Long Term Forex Trading: Strategy & Mindset
Updated: Sep 24, 2022
Its' TIME!! to talk about how to be a successful trader in the long term: in this article you will learn...
What Long Term Trading is.
The Correct mindset to have when Trading
What Characteristics you will need to be successful
What is Swing Trading?
What is Position Trading?
How Logikfx supports successful long term traders
Music: https://www.bensound.com
What is Long-Term Forex Trading?
Long-term forex trading or investing consists of using a combination of fundamental analysis and risk management to be able to keep your active trades open for long periods of time.
This allows you to enter trades that stay open for weeks, months or even years. These are buy-and-hold trades, rather than quick, buy-and-sell-trades.
Your profits can be growing and accumulating for months on end, allowing you to capture trends impossible to foresee when day trading or scalping. The amount of money you make over a longer period of time is drastically different to the majority of losers who try to trade in a day and get out by the night.
Long term trading is THE key principle in the Logikfx method of trading, it is taught in the academy and we have technology that makes long-term trading even easier.
In terms of capital, long term investing seems like it would require a lot more than Short term trading, This is really not the case, if you employ proper risk management you can start off with relatively small levels of initial margin...
To figure out how much you need to start trading: click here
How much time do I need to Trade Forex?
The main benefit of long-term trading is the fact that your trading is spread over weeks and months. This means you can be profiting while you sleep, when you're at work or if you're taking the kids out. You don't need to be sitting in front of the screen 24/7!
Long-term trading frees time, less stressful with better returns
The amount of effort you need to put into managing positions is decreased significantly, with the logikfx fundamental leading indicators this can be increased even further.
A great example of this analysis is the trade ideas the we provide here at logikfx, to gain an insight into the type of analysis we conduct: click here
Some people choose to be more active and may spend a couple of hours per week doing research, especially if they have lots of capital to deploy and are looking for multiple trading opportunities (if their position size calculator allows it).
For the "set and forget" investor, they may only need to do a bit of research, or check on their investments, every few months, possibly when they are ready to make another purchase.
The Long-Term trading Mindset!
It is widely acknowledged that psychological factors play a big part in trading in general.
These three factors are the downfall of many newbie traders, they can all come into play and the more time spent in front of the trading screens, the more likely that emotional and psychological factors will affect decision making.
As taught in the Logikfx academy, the right mindset is key to becoming a successful investor, our team has even devised a test, follow the link below to see if you have what it takes to be a LITA Trader!
What are the key traits of successful investors?
Day traders can’t compete with Long-Term
Investors!
What is "Day Trading"?
This is the worst method of trading you could try, it involves making dozens of trades every day based purely on technical chart analysis.
The day trader's objective is to make a living from trading stocks, commodities, or currencies, by making small profits on numerous trades and capping losses on unprofitable trades.
Day traders typically do not keep any positions or own any securities overnight.
Why do Day Traders exist?
The biggest lure of day trading is the potential for spectacular profits.
This may only be possible for the rare individual who possesses all the necessary traits required to become a successful day trader, such as decisiveness, discipline, and diligence.
Where's the evidence that Day Traders fail?
Most day traders Trade for income, this means they make withdrawals from their brokerage account every month or week to fund their daily activities.
The U.S. Securities and Exchange Commission (SEC) points out that "day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status."
While the SEC cautions that day traders should only risk money they can afford to lose, the reality is that many day traders incur huge losses on borrowed money, or leverage!
These losses may not only curtail their day trading career but also put them in substantial debt.
To learn how to properly manage you leverage make sure to read our guide: click here
As we show in the academy, trading for income is not the way to build well managed long term wealth, and will lead to you actually losing money.
Keep reading as we go in depth about the benefits of investing in the long term, and more importantly...
HOW TO DO IT!
Day traders have to compete with high-frequency traders, hedge funds, and other market professionals who spend millions to gain trading advantages.
With logikfx you can learn to trade with the hedge funds, so instead of competing with them, you are emulating their success!
Logikfx has a huge choice of technology to make your analysis even easier: click here to view
The Two best ways to Trade Long-Term!
There are two ways to trade long term.
These are called Swing and Position trading.
They are very similar but there are key differences between the two including the time commitment needed and also the type of technical analysis that is needed to execute both effectively.
What is Swing Trading?
Swing trading a medium-term trading style that is used by forex traders who try to profit from price swings.
It is trading style that requires patience to hold your trades for several days at a time. with the correct risk management this is extremely easy to do.
With the correct steps LITA traders can enjoy comfort in knowing they wont be priced out of an asset before it moves in their direction.
Swing trading stands between two other popular trading styles: day trading and position trading.
Swing traders identify a possible trend and then hold the trade(s) for a period of time, from a minimum of two days to several weeks.
Swing trading happens at a much slower pace, with longer lapses between actions like entering or exiting trades.
Because trades last much longer than one day, larger stop losses are required to weather volatility, and a forex trader must adapt that to their money management plan.
Luckily for LITA Traders, the academy lays this all out perfectly, technology like the Positions size calculator will help you to manage you money and determine how much leverage you should be using, keeping your strategy intact.
You will most likely see trades go against you during the holding time, this is called drawdown, since there can be many fluctuations in the price during the shorter time frames.
Moving on from this I am now going to explain the 4 best ways to execute swing trades!
The 4 Swing Trading Methods!
At logikfx we use fundamental analysis to determine the validity of any trade we want to enter, after monitoring the two economies and their economic environment for days using our Indicators and technology, we then make an informed decision on whether we thing the trade is ready to be entered.
After the whole monitoring process we then use Chart patterns and Technical analysis to determine when we should enter a trade.
Reversal Trading
This strategy involves you waiting for price to reverse its current momentum.
You can spot reversals by identifying certain patterns of price movement that normally indicate that price is ready to turn.
"Head and Shoulders" or "Double Tops" are two of the most popular Reversal patterns.
Retracement Trading
Retracements or pullbacks are a normal part of price movement when looking at charts.
The market moves in what we call waves, there is an overall direction that the asset is moving in, however, there are always pullbacks where price reverses but then carries on in the original direction.
They are a “minor countertrend within the major trend”
Retracements are a great way to enter a swing trade as if you can predict a price retracement and where it will move too you can essentially get a limited time discount on your asset maximising profits instead of just flat out entering the market!
Breakout Trading
This method of identifying when to open a swing trade involves the support and resistance concept.
When looking to enter a market you will do you fundamental analysis and if it shows you a bullish sentiment on the asset you want to trade, you will start you technical analysis!
Now you will wait of an indication of an uptrend occurring, when the market is ranging, when price breaks a key level of resistance with momentum you have your indication to enter the trade!
Breakdown Trading
This is essentially the polar opposite of the breakout strategy, you will wait for a significant level of support to be broken to confirm your bias, then you enter the trade!
What is Position Trading?
Position trading is the strategy with the longest average holding time.
Consequently, the profit potential is greater, but so is the risk. History is full of famous examples of great traders who made their fortune by implementing position trading strategies...
"Joe Ross spoke of what is surely the longest example of position trading on record, which lasted almost ten years (from 1991 to 2000). The investor in question opened a long-term position in the S&P 500, which he held for a long period of time, by setting a trailing stop that was triggered only when he felt that a good profit had been made, thus finally closing the position with a profit of 16 million dollars." - cmc markets
"Another famous position trader was Philip A. Fisher who, in addition to being a great investor and being followed by a large crowd of admirers, including Warren Buffet, made excellent investments, focusing on good companies with very encouraging data. For example, in 1955 he made a long-term investment in Motorola shares and held that position until his death at the age of 96." - cmc markets
Fundamentals dictate the long-term trends of currency pairs and it is important that you understand how economic data affects your currency pair and its future outlook.
The 4 Position Trading Methods!
Trend Trading using Moving Averages (MA)
Moving averages are a frequently used technical indicator in forex trading, especially over 10, 50, 100, and 200 day periods. Moving averages are lagging indicators, which means they don't predict where price is going, they are only providing data on where price has been.
The 50-day moving average (MA) and 200-day moving average (MA) indicator is a significant technical indicator for position traders.
The reason for this is due to the fact these moving averages illustrate significant long-term trends.
Support and Resistance (S&R) Trading
This method of identifying when to enter a trade is one of the most popular among position traders.
A support level is a price level that, historically, does not fall below. These “historical” support levels can hold for years.
A resistance level is a price level that, historically, tends not to be able to break. These “historical” resistance levels can also hold for years.
when price is approaching an historical resistance level that has held strong and your bias in shot (selling the currency) then you would look for price to reject off that resistance level and enter the market accordingly and vice-versa.
Do Not confuse this method with the Breakout or Breakdown methods as they involve price breaking through these levels of resistance, and this methods is often used on much smaller timeframes than S&R trading.
Breakout Trading
This method of identifying when to open a swing trade involves the support and resistance concept.
When looking to enter a market you will do you fundamental analysis and if it shows you a bullish sentiment on the asset you want to trade, you will start you technical analysis!
Now you will wait of an indication of an uptrend occurring, when the market is ranging, when price breaks a key level of resistance with momentum you have your indication to enter the trade!
Pullback Trading
Pullback trading is very similar to retracement trading, however, they are named differently due to the fact that Pullback trading is done over a significantly bigger timeframe.
Pullbacks can take weeks and sometimes months to fully form, therefore you must be able to identify the end of the pause in the overall trend and get in when price is at its lowest to maximise your long term gains.
The ONLY Swing or Position Trading strategy you will need in 2021
The main struggle with people looking to start trading either the Swing or Position methods is that you don't know where to start...
The methods shown above, while popular, are not the way that you should go about trading forex, whilst still important they are a small part of a much bigger process used by professionals and us here at Logikfx...
let me show you how to get your trading strategy sorted and begin to start investing for the long term!
The best way to start investing for the long term is the three step method we call: Value, Optimise, Risk or VOR for short!
this strategy incorporates a lot of the above material in this article in terms of the philosophy of investing on a more long term basis, the VOR method of trading uses fundamental analysis before any chart patterns or technical analysis to gain a bias based on the big picture, using economic data you can gain a much more solid idea of a currencies strength and then based on that bias, GROW your portfolio!
Value
This is the most important and probably the most complex step, we use fundamental analysis to determine whether trade idea is good or bad and equate its value.
If the fundamentals look good that means the trade is of a high value and there is huge potential for our bias to be confirmed.
If the fundamentals are not so positive or maybe even just neutral the value of that trade decreases and we put those trades on a watch list to see how the fundamentals change over time.
As LITA traders we have access to all sorts of analysis tools and education to help with this step...
Along with a great mentorship programme to help us through this first step process, we call the this the LITA technology and not only is the Macro Currency Strength Meter part of this but also the GDP differential meter both essential in any fundamental analysis.
Non LITA traders and professionals who use fundamental analysis will find all this info, and more, such as interest rate decisions and consumer confidence surveys themselves through hours of research.
Optimise
The second Step is optimise, using indicators and chart patterns as a timing tool we determine a viable point of entry for any trade.
This is where the technical analysis comes to the forefront of professional analysis as it provides a door into the market to allow us to enter safely and be able to move on to step 3 with confidence in our bias.
To optimize our trades us LITA traders have lots of useful tools available.
Risk
This is where we control our risk, using professional risk management methods we are able to protect our capital and ensure safe and well managed trades where we are able to enter the market with complete confidence and security no matter what way the trade goes.
At Logikfx we use our own software and tools such as the basis point calculator, the position size calculator to determine stop loss and take profit and our exposure limit calculator to manage our deposits and our exposure to gain complete confidence in our trade.
Professional traders also pay close attention to our risk to reward ratio, if the risk is significant and the reward is not then we do not place a trade and we go back to step 2 to try and find a better place to enter.
To learn more about Fundamental analysis and its benefits: click here
Don't label yourself by time frame
Below is a video by our Director here at logikfx Marcus Raiyat...
In this video he explains why here at logikfx we have the perfect risk management strategy that works over any timeframe!
How to plan your Trading strategy with Logikfx!
As said before we trade based on volatility, we have the benefit of the LITA technology to make it easier t trade for the long-term as analysis is made so much easier.
My step-by-step guide:
Use the academy to learn about the correct method of trading.
Practice your fundamental analysis and gather a watchlist of economies and currency pairs you like the look of using our LITA technology to help you.
Keep an eye out for our free trade ideas if you are lacking inspiration.
Use the position size calculator to determine how many trades you can open and your leverage and initial margin.
Look out on the blog for trading education and tips.
Start your trading journey when the technical analysis you did tells you is time.
Keep updating your trading journal
Still learning how to trade? Learn through Logikfx Investment and Trading Academy (LITA) and take the first steps into growing your value as a trader with our free online courses, webinars, seminars. All from a small team of highly skilled traders with over 15 years’ experience in the financial markets. Learn how to make money trading forex, alongside the best ways to manage your risk through a proper trading journal, and sensible approaches to setting a stop loss (that doesn't get hit)!
Already know how to trade? Save hundreds of hours each month on trading technology, analysis and research using Logikfx's Macro Technology in the LITA Portal. Computing thousands of fundamental reports for over 23 economic regions, you'll know accurate currency strength at the click of a button.
